GLOBAL – PARIS, JULY 29, 2013 – French advertising group Publicis Groupe SA and its New York-based Omnicom Group Inc. have signed a merger of equals agreement to create the world’s largest advertising company, eclipsing market leader WPP.
The new company, dubbed the Publicis Ominicom Group, has an approximate capital worth of $35.1 billion and will be led jointly by current bosses Omnicom CEO John Wren and Publicis CEO Maurice Levy who will act as co-executives. Its new office will be based in the Netherlands, while the operating offices will remain in Paris and New York.
The merger is the biggest transaction in the advertising industry. A year ago, Japan’s Dentsu Inc. agreed to take over Aegis Group Plc for about $4.9 billion. Advertising agency groups Publicis, Omnicom and London-based WPP, led by Martin Sorrell, have grown through consolidation over decades as they vie with each other for accounts.
These two marketing giants ranked as second and third largest advertising firms with combined revenue of $22.7 billion in year 2012. With the merge, the combined company expects generate efficiencies of $500 million.
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Omnicom CEO John Wren said: “Both Maurice and I believe this new company reflects our vision of retaining the best talent, attracting an incredible roster of clients and leading innovation. Omnicom and Publicis Groupe are reshaping the industry by setting a new standard for supporting clients with integrated messaging across marketing disciplines and geographies. This combination will enable us to leverage the skills of our exceptionally talented people, our broad product offering, enhanced global footprint, and tremendous roster of global and local clients. In short, we believe this is a merger that will set our new company on a path to accelerated growth, with long-term benefits for clients, employees and shareholders.”
Maurice Lévy, Publicis Groupe chairman and CEO said: “The communication and marketing landscape has undergone dramatic changes in recent years including the exponential development of new media giants, the explosion of Big Data, blurring of the roles of all players and profound changes in consumer behavior. This evolution has created both great challenges and tremendous opportunities for clients. John and I have conceived this merger to benefit our clients by bringing together the most comprehensive offering of analog and digital services. Equally important, it will offer our talented people new avenues for growth and success at the crossroads of strategic intelligence, creativity, science and technology.”
Publicis Omnicom Group will provide benefits not just to its 130,000 combined employees but also to its clients and stakeholders. Publicis Groupe and Omnicom shareholders will each hold approximately 50% of the new company’s equity. Clients will achieve industry-leading breadth of services with its extensive advertising and media agencies.
The new company’s brand portfolio includes: BBDO, Saatchi & Saatchi, DDB, Leo Burnett, TBWA, Razorfish, Publicis Worldwide, Fleishman-Hillard, DigitasLBi, Ketchum, StarcomMediaVest, OMD, BBH, Interbrand, MSLGROUP, RAPP, Publicis Healthcare Communications Group (PHCG), Proximity, Rosetta, CDM, ZenithOptimedia and Goodby, Silverstein & Partners.
Adhering to the concept of merger of equals, Publicis Omnicom Group is structured with balanced corporate governance consistent with the spirit of a merger of equals. Wren and Levy will act as co-CEOs through an initial integration and development period of 30 months, following which Levy will become non-executive Chairman and Wren will continue as CEO. The company will have a single-tier board with 16 members, consisting of the two co-CEOs and seven non-executive directors from each company.
For the first year following the closing of the transaction, Omnicom chariman Bruce Crawford, will be the non-executive Chairman of Publicis Omnicom Group. He will be succeeded by the current Publicis Groupe chairperson, Elisabeth Badinter, as non-executive chairperson for the second year following the closing of the transaction.
Wren and Lévy said jointly in the press conference last Sunday: “For many years, we have had great respect for one another as well as for the companies we each lead. This respect has grown in the past few months as we have worked to make this combination a reality. We look forward to co-leading the combined company and are excited about what our people can achieve together for our clients and our shareholders.”
In an article in Reuters, WPP CEO Martin Sorrell said: "It’s a great deal for Publicis, being a nil-premium merger." Sorrell believed the deal seemed to be " off strategy" for the French advertising group. "Time will tell if the cultures will click and whether clients will benefit," he said of the deal, which will give Publicis a far greater U.S. presence."
Being the world’s largest advertising agency group, WPP looks forward to more upcoming deals after the announced merger. "But further consolidation of our industry is inevitable. An equilibrium may be starting to be established which will generate further significant opportunities for WPP organically," he added.
Meanwhile, French advertising agency Havas chief executive David Jones was surprised and doubted the Publicis-Omnicom merger. Jones said in a statement: "I’m not sure this is in the best interests of their clients or their talent Clients today want us to be faster, more agile, more nimble and more entrepreneurial, not bigger and more bureaucratic and more complex."
